Is the Rare Disease Business Model Here to Stay?

These days, the term “rare disease” is well engrained in our everyday vernacular—but that hasn’t always been the case. For the most part, the pharmaceutical industry paid little attention to developing new treatments for rare disease prior to the implementation of the Orphan Drug Act (ODA) in 1983. Fast-track designations along with other positive market-relative factors have made rare disease a lucrative focus area. A few examples:

ODA signed into law incentivizing the industry to focus on the unmet needs in rare disease

FDA Breakthrough Designation (and other fast-tracking) allows a higher degree of access to regulators and has further rewarded the industry to develop new treatments

Payers traditionally have not pushed-back on the higher cost of rare disease treatments

It is estimated that less than 600 of the known 7,000 rare diseases will be addressed by new approvals in the next decade

Developing a treatment for a patient pool of 50,000 with a yearly treatment cost of $350k is more attractive than developing a treatment that affects millions with a yearly cost of $2,000 in a highly competitive marketplace

While the ODA and other designations greatly increased the volume of new treatment submissions, it has often been used to fast-track a brand to market with the intent to later expand its label into a more profitable indication. The exploitation of the system coupled with extremely high sticker prices may now be causing negative industry perceptions. Payers are no longer taking a back seat when allowing access to new treatments and are looking for risk-sharing strategies to mitigate cost of therapy.

Looking to the future, it will be imperative to find new methods of working with payers and advocacy groups, while addressing growing concerns of orphan status abuse and price gouging. That said, with so many unmet needs in rare disease treatment, it is expected that the trend to maintain a rare disease focus, especially in the areas of oncology, hematology, and immunology, will remain steady with plenty of opportunity to go around.

Click here to view our full article published in this month’s PharmaVoice.